A small business owner from Pittsburgh recently called into Dave Ramsey‘s “EntreLeadership” podcast with a common concern: how to raise prices without losing customers. Trenton, who runs a coffee shop and roastery with his wife, said their costs have gone up significantly over the past year, especially for green coffee beans.
Price Hikes Are the Norm, Not The Exception
“Last year we did about $500,000 in revenue,” Trenton said, adding that they employ around 10 people, between part-time and full-time. “The cost of our green beans has risen significantly, especially this past year.”
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His biggest concern is how to communicate those price increases to both retail and wholesale customers without damaging relationships. “We want to be fair to our customers," he said, "but we also need to be fair to us to keep our business healthy.”
Ramsey, who is a personal finance expert and entrepreneur himself, didn't hesitate to give him the green light: raise the prices.
“We live in an environment where everything price increased,” Ramsey told him. “If I walked into a coffee shop and randomly the price had gone up, I wouldn’t be going, ‘Oh, Trenton got greedy.’ I’d be going, ‘Man, his cost probably went up.'”
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Trenton specifically mentioned being concerned about wholesale clients like restaurants and grocery stores. Ramsey pushed back on that fear, saying those clients are seeing cost increases across all their suppliers. “If the only way you keep them as a customer is you lose money, then we don’t need them as a customer," he said. "It doesn’t work anymore.”
Ramsey also emphasized that business owners don't necessarily need to over-explain the price changes. A short heads-up can go a long way. “The reason for these increases is not to line my pockets. It’s because my costs have all gone up,” Ramsey said as an example of how to communicate the message.
To drive the point home, Ramsey shared how his own publishing team recently had to raise book prices after losing money due to higher paper costs. “We did a quick study of the market and we were the only ones that were not $32 and $34 going up from $22 just four or five, six years before, right?” he said. “When we moved ours up and were the same price as everybody else in the market, we did not get a single complaint.”
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Ramsey reassured Trenton that most customers understand the current economic climate. “You’re just passing on your hard costs. My labor costs and my price of goods sold have gone up substantially.”
He ended the call with encouragement. “You’re a good man," he said. "You’re the kind of people that win in business because you care about the customer. You care about the perception of your brand.”
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Image: USA Today Network
